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Dubai or Pakistan, invest in realty

Pakistanis are among top three non-Arab investors in Dubai real estate, but 93% expats are keen to invest back home in plots and houses, writes Muzaffar Rizvi

Overseas Pakistanis residing in the UAE have shown keen interest to buy properties in major cities back home due to stability in the real estate market following improvement in the security situation, according to latest data issued by Zameen.com.
A research report for the first half of 2015 from Pakistan's largest real estate portal shows that about 93 per cent of Pakistani expatriates in the UAE want to purchase properties back home. Fifty four per cent of Pakistani expats prefer to invest in plots over houses and apartments. Around 37 per cent and nine per cent of Pakistanis in the UAE have shown interest in buying houses and apartments respectively.
Zameen.com chief executive Zeeshan Ali Khan said a lot of overseas Pakistanis find the country's thriving real estate sector the best bet for investing wealth.
"Around 15 per cent to 20 per cent of remittances, which registered a yearly growth of 16.6 per cent in financial year 2014-'15 from $15.8 billion to $18.4 billion, goes directly into the real estate industry," Khan told Khaleej Times.
Pakistanis residing in the UAE contributed $4.23 billion, or 23 per cent, to the total remittances in 2014-'15 while expatriates in Saudi Arabia remitted $5.63 billion and remained on top of the table.
Overseas Pakistanis remitted $3.19 billion in the first two months (July and August) of the current financial year 2015-'16, showing a year-on-year growth of 5.42 per cent. A major portion of this amount was received from Gulf countries, including $483.29 million and $319.15 million from Saudi Arabia and the UAE respectively.
"With remittances going up steadily, more capital is likely to be pumped into the property sector. As always, a large chunk of this investment is expected to come from the Middle East. In fact, more than 60 per cent of the $18.4 billion remitted last year came from Pakistani workers in the GCC, particularly in the UAE and Saudi Arabia," Khan said.
"This workforce, together with other overseas Pakistanis around the world, pours in a major portion of their wealth into the realty sector to either build houses or invest in lands. Property is considered an attractive investment product because the sector is largely cash-based and the market is very resilient or crash-proof. It's also one of the most lucrative investment products in Pakistan where returns on new projects can be as high as 20 to 30 per cent per annum," he added.
Popular developments
The research report shows that Bahria Town Lahore and Defence Housing Authority (DHA) Lahore were the top two preferred destinations for Pakistani expatriates in the UAE as the two housing schemes received the maximum enquiries (14.99 per cent and 9.57 per cent respectively) on the portal's search engine during the January-June period this year.
It was followed by Bahria Town Rawalpindi (5.79 per cent), DHA Islamabad (5.1 per cent), DHA Karachi (4.42 per cent) and Bahria Town Karachi (3.71 per cent).
On average, overseas Pakistanis are willing to invest Rs6.21 million in Bahria Town Lahore while DHA Lahore and Bahria Town Rawalpindi received enquiries based on an average price of Rs14.56 million and Rs4.45 million respectively.
At DHA Islamabad, the average price is Rs5.01 million while DHA Karachi hit Rs31.3 million average price during the first half of 2015 compared to Rs3.96 million average price at Bahria Town Karachi, according to data compiled by Zameen.com, which is the largest and most credible property portal in Pakistan with two million monthly visits.
"With a lot of private developments coming up, including an array of DHA projects in cities such as Gujranwala, Multan, Bahawalpur, Sialkot, Peshawar and even phase 9 in Lahore, we could see an overwhelming response from overseas Pakistanis who have an eye for top-notch projects across the country," Khan said.
In 2015, Khan said the market has been stable in terms of prices but the overall growth has been slow. He said Lahore has been stable with a few areas seeing controlled drops and minor corrections, and this trend may continue for the rest of the year. Islamabad has seen a similar trend, but certain locations in Karachi have seen impressive growth, such as DHA Karachi.
"Overall, the market activity has picked up since Eid Al Fitr and it could last until the end of the year. But we are not expecting any major price increments, like ones we saw in 2013," Khan said.
Referring to Zameen.com's property index, he said real estate prices in Pakistan have seen increments of about 50 per cent in the last three years, leading to a natural market slowdown today.
"In 2015, prices have increased a marginal two per cent. This period of slowed growth could last for the remainder of the year, but we do see chances of decent growth for new developments, especially the ones focusing on middle or low-income groups," he said.
Win-win situation
Though a lot of Pakistanis invest in properties abroad, especially in Dubai where Pakistanis are among the top three non-Arab investors, a major portion of income generated from abroad finds its way back home and into the country's economic sectors, resulting in a multiplier effect.
"Dubai remains a very attractive market in terms of investment because of its high rental yields, which hover around eight per cent to 10 per cent. In a lot of cases, investment in Dubai or any other foreign market creates avenues for remittances back to Pakistan through profits from sales or rental income of properties owned by Pakistanis, which ultimately contributes to the economy," Khan said.
"Investment in robust markets like Dubai should be welcomed as it provides investors with an extra stream of income, most of which returns to the country in the guise of remittances, helping the nation's current account balance," he added.
"Though buying property in the UAE is costlier than investing in Pakistan, the exceptional returns make the investor forget the initial hardship. As the UAE dirham is pegged to the US dollar, any rise in the dollar's value improves the dirham's buying power as well. Therefore, a rental income in dirhams travels much farther than one in rupees, encouraging many Pakistanis to take a leap of faith into the UAE real estate market," Khan concluded.
- muzaffarrizvi@khaleejtimes.com